On January 3, 2023 morning, at the virtual National Conference between the central Government and the local authorities to review the performance in 2022, and to implement the conclusions of the Central Committee and the Resolution of the 15th National Assembly on the socio-economic development plan for 2023, Governor Nguyen Thi Hong of the State Bank of Vietnam (SBV) made a speech with the topic of "Monetary policy: responding flexibly, contributing to controlling the inflation, maintaining the macro-economic stability, increasing the independence and the self-reliance of the economy”.
Governor Nguyen Thi Hong makes a speech at the Conference (Photo: Duong Giang)
Expressing her agreement with the key report of the Conference, Governor Nguyen Thi Hong assessed that in 2022, the domestic economy had faced many difficulties and challenges, with high pressures from unprecedented fluctuations in the world and domestic economy; the Government had to both deal with the limitations and inadequacies of the domestic economy, and resolve the arising and unprecedented challenges. However, Vietnam is the only country in the Asia-Pacific region and one of the few countries in the world that had been upgraded in the credit ratings since the beginning of 2022. This was a remarkable result in the context that the world and regional economy had witnessed high inflation rates, and sluggish growths in many economies.
Difficult context and challenges for monetary policy management in 2022
In her speech at the Conference, the SBV Governor shared that 2022 had been an extremely challenging year for the monetary policy management, under the pressures of both high inflation and interest rates, the US dollar appreciation, and difficulties in the stock, real estate, corporate bond markets. A number of challenges can be identified such as: (i) How to manage credit in the direction of supporting the economic growth while still ensuring a safe and prudent banking sector in the context that the ratio of credit/mobilized capital as well as the ratio of loan outstandings/GDP had been at their warning levels; (ii) How to stabilize the forex market when the domestic economy has a big openness, and the domestic production depends significantly on imports, etc.; (iii) How to maintain the stability and the prudence of the banking system when the systematic liquidity and the market confidence had been strongly affected by the unprecedented incident involving the SCB.
With the calm and the proactive perspective in the direction and administration of the Government, the Prime Minister, and the SBV’s synchronous implementation of many solutions and policies, by the end of 2022, the banking sector has made significant contributions to strengthening the macro foundation; the inflation has been controlled at a low level (the all year average rate of 3.15%); the economic growth has been recovered at a high level (about 8.02%); the money and the forex markets have been basically stable (the VND had depreciated by 3.8% against the USD, and the common interest rates had increased by 1%, these fluctuations have been much lower than those around the world and in the region).
Lessons learned from the practical management in 2022
First, in the context that the domestic economy has a big openness, it is important to be well prepared with flexible responses to fluctuations, thereby enhancing the independence and the self-reliance of the economy in the context of deep integration into the global economy.
Second, the SBV has always been consistent with the objectives of managing the monetary policy to contribute to controlling the inflation, maintaining the macro-economic stability, and supporting the economic growth depending on the practical situations to determine the priorities for each period.
Third, each policy has different impacts on different sectors of the economy, and it is important to have flexible responses on the basis of close monitoring of the situations.
Operating monetary policy and making policy recommendations for 2023
In 2023, the world and domestic economy may still face many difficulties. Therefore, the SBV will: (i) focus on the solutions, giving the highest priority to ensuring the liquidity and maintaining the stability and safety of the banking system; (ii) continue to operate the monetary policy tools in a flexible and synchronous manner in close coordination with the fiscal policy and other macro-economic policies in order to contribute to controlling the inflation, maintaining the macro-economic stability, ensuring the macro balances of the economy; maintaining the stability in the money and forex markets; (iii) direct the credit flows to production and business, and priority areas; continuing to accelerate the implementation of the assigned tasks as stated in the Socio-economic Recovery and Development Plan, the National Target Programs; (iv) coordinate with the relevant Ministries and agencies to advise possible solutions to remove any difficulties for the markets.
Le Hang